The boss of Admiral has dismissed suggestions that the motor insurer is profiteering after the company announced a jump in first-half earnings driven by higher premiums.
Revenue at the FTSE 100 company climbed by 43 per cent year-on-year to £3.2 billion in the six months to the end of June, pushing up pre-tax profits in the period by 32 per cent to £309.8 million.
It said its top line had benefited from “significant rate increases” that it had pushed through during the previous year and in 2022, when motor insurance premiums across the industry rose sharply to offset inflation.
The Cardiff-based company’s higher half-year profits prompted it to announce a bumper cash return for shareholders. It will hand back about £213 million by boosting its interim dividend to 71p a share, up 39 per cent compared with a year earlier.
Admiral is one of Britain’s biggest motor insurers, providing cover for 5.5 million vehicles, as well as selling home, travel and pet policies and running a smaller business overseas.
Insurers have sought to increase their motor cover charges in the past two years because higher prices for spare parts and second-hand cars, as well as rising labour costs in repair shops, have pushed up the cost of handling claims. However, the increase in prices has left some people struggling to afford insurance for vehicles, with the average premium peaking at a record £635 in the first quarter of this year, according to data from the Association of British Insurers. This, in turn, has prompted criticism that insurers are profiting unfairly from the inflationary environment. Before Labour came to power last month, the party had pledged to crack down on the industry.
Prices across the industry are starting to fall, with the average premium dipping by 2 per cent to £622 in the second quarter of 2024 compared with the first three montnhs of the year. The premium is still 21 per cent higher than a year earlier, according to ABI figures.
Milena Mondini de Focatiis, 47, Admiral’s chief executive, insisted that the company’s pricing had remained competitive. “We started to decrease prices earlier than the market on average and by mid-single-digits already this year” she said, adding that this was why Admiral was “growing so fast”, with its base of British insurance customers rising by 17 per cent year-on-year to 8.2 million. Asked whether the business had been profiteering, she said: “We are very focused on our customers, we are very competitive.”
Profits at its core UK insurance business rose by a fifth to £363 million, which Admiral said was a result of “higher average premiums now earning through”, as well as “continued significant releases of prior period claims reserves”.
Its motor division delivered a combined ratio of 73.8 per cent, an improvement on the 82.3 per cent it reported a year earlier. This ratio is a key measure of an insurer’s underwriting performance, with a reading below 100 per cent indicating a profit and anything above that level implying a loss.
Shares in Admiral closed up by 183p, or 6.5 per cent, at £29.93.